Banks who are planning to establish an offshore business presence in Guernsey must follow a serious process before obtaining the licence to function on the island. There are specific requirements and details to fulfill and take care of.
- Regulatory Approval
When a bank wants to open a business in Guernsey, this subject has to be discussed with the Superintendent of Banks or with the Director General of the GFSC (Guernsey Financial Services Commission). The GFSC must be persuaded that the presence of the bank will generate a significant net income benefit to Guernsey. Formal applications are formulated according to the Banking Supervision Law.
It can be observed a tendency to favor to European and Far Eastern banks, but also to reputable banks which propose a profitable business using a minimum of staff and office space. However, new licences are given to banks with high international standing only.
- Professional Advisers: Lawyers and Accountants
For obtaining the licence, the bank should hire a firm of lawyers and a firm of accountants who have experience in Guernsey banking. These professionals are indispensable in getting the necessary approval, but they can also offer the bank other services.
Lawyers advice on the legal procedures of Guernsey, review leases for premises, provide advice on legal agreements and many others. Among many services, accountants provide Guernsey tax advice, advice on premises and staff, advice on financial and regulatory reporting requirements and perform annual audits.
- Preliminary Approval
If a bank has the approval to establish an offshore banking presence in Guernsey, it can start trading without the need of a probationary period.
In order to obtain an offshore Guernsey licence, the bank has to follow some basic steps:
- Hire a firm of lawyers and lawyers with Guernsey banking experience;
- Consider the international tax planning;
- Decide whether to establish a subsidiary or branch;
- Decide whether to establish a physical presence on the island or an administered bank
- Have a detailed discussion with the GFSC, preferable in the presence of the Guernsey accountant
- Address to the GFSC the letter of intent or the outline proposal for submission
The letter of intent should contain, among other details: the background of the bank, the business plan of the proposed branch or subsidiary, money laundering procedures, details of shareholders, proposed year end, business forecast and projected financial statements, stuff levels, names of directors, proposed auditors and advocates, and a proforma letter of comfort to take legal responsibility.
If the bank will be an administered Guernsey bank, details of the manager and copies of the proposed management agreements should be attached to the request. The agreements refer to appropriate indemnities, rental of premises, services and stuff. There should be demonstrated that the central management and controls are set on Guernsey.
- Administered Bank or Physical Presence
The criteria set by the GFSC are similar for both administered banks and physical presence on the island. Still, administered banks are more encouraged because of pressures on staff and office space.
When deciding whether to choose an administered bank or physical presence, the bank should consider the type of business, cost benefits, managing bank, confidentiality, and computerization.
- Issue of Licence
On receiving preliminary approval, before the licence is issued, the bank should take into consideration several aspects such as company name, international tax planning, staff recruitment, premises, company registration, formal application, and administrative details.
Before obtaining the licence, the auditors are asked to confirm to authorities that the capital of the subsidiary or branch has been received and all shared have been issued.